Govt changes bad for tenants, landlords

Tauranga landlord Tony Cranston believes both tenants and landlords should be more concerned about the government’s proposed changes around rental rules. File photo.

A Tauranga landlord has lashed out at the government’s proposed changes to rental rules, saying the extra costs are unaffordable for both tenants and landlords.

Tony Cranston, who owns 13 rental properties around Tauranga, believes recent moves by the government to improve the quality of rentals will create extra expenses.

Among the examples Tony cites is insulation, which he says can cost ‘up to $3000 plus per house’, and which the government requires in ceilings and underfloors by July 1, 2019.

He also says the government is looking at rentals needing to have heating and ventilation.

“A couple of my properties have heat pumps that were installed when I bought them, but most use electric heaters, which I’m happy to provide if tenants want them,” says Tony.

“But if we have to install heat pumps it will cost $2700 per unit. That’s $10 per week for five years plus ongoing maintenance and replacement.

“If we are also forced to put in a home ventilation system (so tenants don’t have to open windows) that would be $4000 to $5000 per unit plus ongoing maintenance. That’s another $20 per week for five years plus replacements.”

He says these measures and other costs, including increases in rates and insurance, will only push up rents.

“Neither the landlords nor the tenants will be able to afford what the government wants to do. They have this great wish list of things they want to do, but they’re not taking the financial burden into account.”

He also cites a recent court case, in which tenants left a pot on a stove that caused a fire and thousands of dollars in damage to a property. The insurance company paid the landlord, and then pursued the tenants for the costs – but the court ruled the tenants weren’t liable.

“It’s created a situation where if tenants damage a property, they’re not responsible. If you accidentally damage a car you’re responsible, but not your landlord’s property,” says Tony.

He believes most landlords are benevolent people living on average wages.

“They won’t be able to absorb that level of expense. Expect rents to rise and the rental market to dry up.

“These are only some of the reasons many landlords are considering exiting the rental market. The result will be less properties to rent as people who would have sold to investors will hold or buy existing stock and new builds will slow down. Rental properties won’t mysteriously appear as Phil Twyford expects.”

Tony thinks most of the new legislation is unnecessary, as ‘any property which is substandard can be rectified by the tenant issuing 14 days’ notice to rectify’.

“If the landlord fails to comply the tenancy tribunal will step in giving exemplary damages, a legal requirement to rectify and possibly rent refunded and rent suspended till the repairs are done.

“Properties should be dealt with on a case by case basis by seeking help from the tribunal.”

HOUSING MINISTER: TENANCY LAWS ‘OUTDATED’

“Our tenancy laws are some of the most outdated in the developed world,” says Housing and Urban Development Minister Phil Twyford.

“With about a half of all New Zealanders now living in private rental properties, it is important that both landlords and tenants have laws which protect them and promote sustainable tenancies.”

He says the government makes no apologies for wanting to improve the quality of rental homes so they are healthy for families to live in.

“That’s why last year we passed the Health Homes Guarantee Act. It means rental properties will have to have adequate heating, insulation and ventilation to bring them in line with international standards for health.”

He says the majority of landlords operate with integrity and try to provide decent accommodation at a reasonable rent.

“We are not ‘attacking’ landlords, nor do we want them to leave the market. We just want to make sure those who have to rent, or chose to rent, do not suffer from substandard properties.

“We are banning letting fees because they are a service that primarily benefits landlords, not tenants, as they cover the costs of advertising a property, conducting open homes, and vetting potential tenants. Similar moves in Scotland did not result in landlords raising their rents.”

It is likely some landlords will face some cost to meet minimum standards that are being developed under this new law, says Phil.

“Landlords that have not routinely maintained or invested in their properties will likely face greater costs. Most landlords will not face significant costs because of the changes our government is introducing.”

Consultation on the minimum standards will take place later this year and landlords are encouraged to have a say through the submission process.

“Landlords will be given time to bring their properties up to modern standards for a warm, dry healthy home.”

He says there is no new requirement proposed for landlords to test for asbestos, and no proposals for a rental ‘warrant of fitness’.

14 Comments

will create extra expenses?

Posted on 17-05-2018 15:38 | By MISS ADVENTURE

That is absolutely correct and in fact so much so that some rentals wont be able to be compliant. The result less houses to rent and so rent will increase. That of course is very obvious as to what is going to happen, but way to hard for Government to see or figure or comprenhend remotely. After they will still be wondering why rents have risen and why there are even less houses available than in the past!

Cc8

Posted on 25-04-2018 07:55 | By NZer

You mentioned depreciating in rentals. The tax department stopped landlords from depreciating their rental houses years ago so that is not an option now.

I wonder if...

Posted on 20-04-2018 10:57 | By Neiliies

I wonder if tenants will even bother using heat pumps and ventilation systems if they are run by electricity?? We installed a heat pump in our own home, were told by everyone they were cheap to run - they’re not, they cost a heaps to run!, I believe it cost more to run than our normal heater.

My

Posted on 19-04-2018 21:58 | By Capt_Kaveman

Place as a log burner so the under floor should not apply as the house has more than enough heating to dry it out unlike electric

Think about this .......

Posted on 19-04-2018 20:34 | By StevieB

If the Government has decided that a rental property must have insulation & possibly heatpumps to make it safe for tenants to live in, does this apply to the owner-occupier of a house next door to a rental who does not have insulation or heatpumps?. Is that property deemed by the government to be unsafe to live in too & will they force the owner to insulate & install a heatpump their own private house ? If not, then why are landlords being targeted with a different set of rules about what is safe for a person to live in? It should make no difference if the house is tenanted or privately owned as to the test of being safe or not.

look at demand effect

Posted on 19-04-2018 17:11 | By waxing

If you don’t make the changes Mr Cranston, you won’t have people interested in your properties. If your colleagues also don’t, and push rents too high, you won’t have the demand to actually rent your places or to sustain high rents. And if you make the changes, you are more likely to get a good long term tenant that will look after the place for you. Or are you simply interested in short term capital gain?

Wow

Posted on 19-04-2018 17:02 | By overit

13 rentals. Poor chap.

Debatable

Posted on 19-04-2018 16:02 | By mikeperro1

If he sold 16 rentals he would have ample cash and left over housing for people to buy. He really got expensive quotes as a heat pump installed is $1600inc.

Tenancy Act

Posted on 19-04-2018 15:46 | By CC8

Mr Cranston has 13 rental properties , but he does not know the provisions of the Tenancy Act. I would have thought that someone in his position would know the act inside out. The pot on the stove is specifically covered by the act , which says the Tenant is not liable for accidental fires, among other things. https://www.tenancy.govt.nz/assets/Uploads/Tenancy/Tenancy-Tribunal-Practice-Note-20161-Tenant-Liability-for-Damages.pdfAs far as fitting heat pumps and ventilation systems , surely he must realise that these are capital investments in his building which not only improve his tenants life , but keep his building in better order, AND INCREASE THE RESALE VALUE. The initial capital cost might sting on 13 properties but depreciation and tax deductions will lower the pain level quite quickly. If this doesn’t work for Mr Cranston , I suggest his business model and due diligence was maybe not up to scratch.

Cost to Landlords

Posted on 19-04-2018 14:45 | By MISS ADVENTURE

Perhaps between $5,000 and $80,000 per house. That means a landlord will have to increase rents, any landlord who does not comply will have to exit the rental/landlord market and so that means less available, this is prima-1 stuff but is clealy beyond the current Government and the capacity to comprehend such basic and simple things... rents will haave to increase and less rentals will be available. New houses coming onto the market currently can not keep pace with demand for buyers owner/occupy. Obvious what is going to happen here.

@ Jed

Posted on 19-04-2018 14:41 | By MISS ADVENTURE

You are right, however tenants should have to have insurance. It is the same as a car, you have as part of your insurances "Third Party" cover, that means if you hit another car and you have insurance then teh Insurance Companies sort it out. If you dont then the insurance company sues you personally. Somehow that basic principle just does not apply to tenants? So logically it does not apply for cars, when you hit someone and have no cover... just walk away no responsibility at all. So all the burden is on the landlord, then of course insurance premiums will rise (liek rates) and so rent must increase to cover that cost or many will indeed exit the rental market, means less landlords, less houses and so the rent increases reflective of supply/demand (Econimics 101) ... labour have not got to that level oif understanding as yet.

Whinge

Posted on 19-04-2018 13:07 | By Raeleen

Why whinge, would it be so terrible if tenants had warm dry houses to live in? I bet this guys profit margin won’t change a cent!

I sometimes.

Posted on 19-04-2018 12:47 | By Merlin

I sometimes wonder if the landlord would like to live in those cold conditions or are they just more interested in the rent money.

Inconsistent argument

Posted on 19-04-2018 11:36 | By jed

Tony says all costs are simply passed to tenants but then goes on to complain that tenants are not required to have insurance. However surely he has insurance coverage which covers damage by tenants. Is he saying the tenants do not pay for the cost of this insurance in their rent? Surely that is the case, so in reality the tenants are paying the insurance so why shouldnt they be covered by that insurance?